Politics

1:19 pm

Fri May 23, 2014

Obama Taps San Antonio Mayor Julian Castro For HUD Secretary

San Antonio Mayor Julian Castro is a rising star in the Democratic Party. He spoke at the Democratic National Convention in Charlotte, N.C., in 2012.

J. Scott ApplewhiteAP

President Obama has been playing musical chairs with his Cabinet.

At the White House on Friday, Obama announced that he's chosen Housing and Urban Development Secretary Shaun Donovan to be his new budget director. Donovan would replace Sylvia Mathews Burwell, who's taking over the Department of Health and Human Services.

That leaves a vacancy atop the housing department, which the president plans to fill with an outsider: Julian Castro, the mayor of San Antonio and a rising star in the Democratic Party.

Castro would take over as HUD secretary at a time when the nation's housing market has been treading water.

There was some positive news this week about new and existing home sales inching up in April, but the overall spring selling season has been a disappointment. Housing does not look to be the engine of economic growth many forecasters had been hoping for.

That's a challenge to the secretary because HUD plays an important role in the housing market. Through the Federal Housing Administration, HUD guarantees more than 1 in 10 home loans. Guy Cecala, publisher of Inside Mortgage Finance, says FHA-backed loans can be a door opener, since they require a down payment of just 3.5 percent.

"It's considered the best option for first-time homebuyers. Given the fact that we're waiting for the housing market to recover, and we're trying to encourage first-time homebuyers, there's a lot of attention focusing on FHA."

Many lenders remain skittish about making home loans, partly out of fear that if those loans go bad, FHA and other government guarantors, like Fannie Mae and Freddie Mac, will come after the lender. As a result, White House economists argued in an op-ed this week, credit remains harder to come by than it should be, keeping millions of potential buyers out of the housing market. FHA has been working with lenders to address that, and has launched a pilot program to discount some of its own fees.

Of course, guaranteeing home loans is just one of many functions carried out by the sprawling $45 billion department Castro's been tapped to lead. HUD also provides rent subsidies and runs a slew of economic development programs.

Bruce Katz, who was chief of staff at HUD during the Clinton administration, says in order to do that successfully in this time of tight budgets, Castro will have to work with city and state governments, as well as the private sector.

"I think a former mayor, coming from San Antonio, which is a major metropolis, understands how cities work and how a federal government can leverage up those local resources and powers in a smart, strategic way."

Donovan earned high marks for his work at HUD, especially on federal recovery efforts in the wake of Hurricane Sandy. Katz says Donovan pushed HUD to team up with agencies overseeing transportation, the environment and human services.

"When you think about the people who are most in need of housing, they're also in need of being close to work. They're also in need of child care. And I think Secretary Donovan was really at the vanguard of those kind of integrated approaches."

Now that Donovan has been tapped as White House budget director, he'll have a chance to extend his reach throughout the executive branch.

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Transcript

ROBERT SIEGEL, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

AUDIE CORNISH, HOST:

And I'm Audie Cornish. President Obama's been playing musical chairs with his Cabinet. At the White House this afternoon, Obama announced that he's chosen HUD Secretary Shaun Donovan to be his new budget director. Donovan replaces Sylvia Mathews Burwell, who's taking over as Health secretary.

The moves leave a vacancy atop the Housing and Urban Development Department, which the president plans to fill with an outsider, Julian Castro. He's the mayor of San Antonio and a rising star in the Democratic Party. Here's the president backing the pick.

PRESIDENT BARACK OBAMA: You know, as mayor, Julian's been focused on revitalizing one of our most wonderful cities, planning thousands of housing units downtown, attracting hundreds of millions of dollars of investment. He's built relationships with mayors all across the country. He's become a leader in housing and economic development.

CORNISH: And as NPR's Scott Horsley reports, Castro would take over as housing secretary at a time when the nation's housing market has been treading water.

SCOTT HORSLEY, BYLINE: There was some positive news this week about new and existing home sales inching up in April, but the overall spring selling season has been a disappointment. Housing does not look to be the engine of economic growth many forecasters had been hoping for. That's a challenge to the secretary because HUD plays an important role in the housing market.

Through the Federal Housing Administration, or FHA, HUD guarantees more than 1 out of 10 home loans. Guy Cecala, publisher of "Inside Mortgage Finance," says FHA-backed loans can be a door opener, since they require a down payment of just 3.5 percent.

GUY CECALA: It's considered the best option for first-time homebuyers. Given the fact that we're waiting for the housing market to recover, and we're trying to encourage first-time homebuyers, there's a lot of attention focusing on FHA.

HORSLEY: Many lenders remain skittish about making home loans, partly out of fear if those loans go bad, FHA and other government guarantors, like Fannie Mae and Freddie Mac, will come after the lender. As a result, White House economists argued in an op-ed this week, credit remains harder to come by than it should be, keeping millions of potential buyers out of the housing market.

FHA has been working with lenders to address that. It's also launched a pilot program to discount some of its own fees. Of course, guaranteeing home loans is just one of many functions carried out by the sprawling $45 billion department Castro's been tapped to lead. HUD also provides rent subsidies and it runs a slew of economic development programs.

Bruce Katz, who was chief of staff at HUD during the Clinton administration, says in order to do that successfully in this time of tight budgets, Castro will have to work together with city and state governments, as well as the private sector.

BRUCE KATZ: I think a former mayor, coming from San Antonio, which is a major metropolis, understands how cities work and how a federal government can leverage up those local resources and powers in a smart, strategic way.

HORSLEY: Outgoing HUD Secretary Shaun Donovan earned high marks for his work, especially on federal recovery efforts in the wake of Hurricane Sandy. Katz says Donovan pushed HUD to team up with agencies overseeing transportation, the environment and human services.

KATZ: When you think about the people who are most in need of housing, they're also in need of being close to work. I mean, they're also in need of child care. And I think Secretary Donovan was really at the vanguard of those kind of integrated approaches.

HORSLEY: Now that Donovan has been tapped as White House budget director, he'll have a chance to extend his reach throughout the executive branch. Scott Horsley, NPR News, the White House. Transcript provided by NPR, Copyright NPR.